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Suppose that you have ₱80,000. You decided to deposit it in a bank and will not withdraw from it for 10 years. A bank offers two types of compound interest accounts. The first account offers 6% interest compounded monthly. The second account offers 6.5% interest compounded semi-annually. Which account will you choose if you want your money to earn more? Explain in 2 sentences. |
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Answer» Given : Suppose that you have ₱80,000. You decided to deposit it in a bank and will not withdraw from it for 10 years A bank offers two types of compound interest accounts. The FIRST account offers 6% interest compounded monthly. The second account offers 6.5% interest compounded semi-annually. To Find : Which account will you choose if you want your money to earn more Solution: Principal = 80,000 Time N = 10 Years 6% interest compounded monthly. R = 6/12 = 1/2 % per month n = 10 x 12 = 120 A = P(1 + R/100)ⁿ => A = 80000 ( 1 + 1/200)¹²⁰ => A = 80000( 1.8194) => A = 1,45,552
6.5% interest compounded semi-annually. R = 6.5/2 = 3.25 % semi-annually n = 10 x 2 = 20 A = P(1 + R/100)ⁿ => A = 80000 ( 1 + 3.25/100)²⁰ => A = 80000( 1.8958) => A = 1,51,664 1,51,664 > 1,45,552 Hence 6.5% interest compounded semi-annually is better option. Learn More: calculate the compound interest for the second YEAR on rupees 8000 ... For a sum compound interest of fifth year is rs. 22743 and compound ... Find the amount and the compound interest rs 300 at 3% per annum ... |
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